Unelected Officials Now Face Scrutiny on Stockholdings ; Some Say the Raised Ethics Standards Will Only Serve to Discourage People from Taking Public-Service Jobs

Article excerpt

When four power traders from Pasadena, Calif., came to the state capital several months ago to help keep the world's eighth-largest economy from falling into the abyss of blackouts, portfolios never came up. Perhaps they should have.

The traders were recently fired because they held stock in one of the power companies that the state was buying from. As the investigation widens, it points to a new truth in American politics: Ethics standards once applied only to elected officials are increasingly being applied to every public servant.

This scrutiny has risen, as Americans demand a higher level of disclosure than ever before. Government reforms root out corruption at deeper levels, even as the Web and 24-hour news stations offer unprecedented access to information.

To some experts, it's an example of overzealous officiating, as rabid political watchdogs chase off qualified would-be public officials by forcing them to become financial eunuchs. To others, though, such sacrifice is a crucial part of making sure every aspect of government is trustworthy.

"What is new is the focus on ... people who were not elected," says David King of the John F. Kennedy School of Government at Harvard University in Cambridge, Mass. "For a long time, they've flown under the radar."

The issue of stocks and conflict of interest has been particularly prominent during the past year. For one, President George W. Bush's top adviser, Karl Rove, has been criticized twice for meeting with representatives of industries in which he has major financial holdings. Also, Secretary of Defense Donald Rumsfeld has had to ask for two 90-day extensions to divest himself of his stocks.

At the state level, concerns in California surrounding the state's energy crunch have been the most prominent example. But there are others:

* Late last year, more than a dozen state officials and regulators in Minnesota came under fire for holding stocks in companies with which they did business. The commissioner of health had stock in an HMO, a medical-equipmentmaker, and two drugmakers.

* Wisconsin's appointed lieutenant governor, Margaret Farrow, was criticized earlier this year for refusing to put her portfolio into a blind trust - in which a trustee makes all investment decisions.

* Even in Georgia, where ethics laws are comparatively weak, critics have attacked the state agriculture commissioner, who holds stock in some firms he regulates. …